Arnar-Stone manufactures approximately 95 percent of all the products it sells. We maintain a fully integrated research staff with capabilities in the areas of product development, organic synthesis, pharmacology, toxicology, and clinical investigation. We have been successful in securing approval of new drug applications for a number of products.

All of us at Arnar-Stone have been and are greatly concerned about the abuse of methaqualone which has become increasingly apparent over the past few months. Accordingly, we will cooperate in implementing any measures that may help to prevent such abuse. As you are aware, on March 15, 1973, representatives of the Bureau of Narcotics and Dangerous Drugs announced the Bureau's recommendation that methaqualone-containing products be placed in schedule II of the Controlled Substances Act of 1970. Prior to that time Arnar-Stone had urged, in writing, that methaqualone be placed in schedule III of the act. Although Arnar-Stone previously recommended the placement of methaqualone in schedule III, as stated in our submission of March 22, 1973, to this Subcommittee. We will not contest placement of methaqualone in schedule II of the act, as we are interested in curbing all misues of the drug.

We are also concerned about the totality of the durg abuse problem. As expressed earlier in these hearings, restricting the use of one product may merely encourage the abuse of a pharmacologically similar product. Controls must be established and promulgated that prevent misuse of all such products. Of course, at the same time such controls should not unduly restrict use by the medical profession in satisfying legitimate patient needs.

Perhaps it would be helpful to describe the steps Arnar-Stone has already taken to prevent the abuse of methaqualone.

Arnar-Stone began scientific and clinical investigation of methaqualone approximately 10 years ago. Pharmacological, toxicological, and clinical studies were performed to document the safety and efficacy of the drug. Our intent was to provide the public with a drug which was both safe and efficacious. Our new drug application was approved by the Food and Drug Administration in 1967. The total methaqualone sales of Arnar-Stone in 1972 were approximately $760,000.

Methaqualone-containing products can only be dispensed legally under the prescription of a physician or other licensed practitioner. To prevent the loss or diversion of its methaqualone products, Arnar-Stone employs strict plantwide security systems that limit access to production areas and that safeguard methaqualone products in all stages of their processing, storage, and shipment. ArnarStone has installed sophisticated electric alarm and surveillance systems in its manufacturing facilities. All methaqualone raw materials and finished tablets are kept in limited access, locked facilities. We are unaware of any in-plant losses. We have not experienced significant losses in shipment; with the exception of one burglary, which resulted in the loss of 48,000 tablets, losses by theft have been minimal. Information regarding losses either in shipment or by theft were included in our submission to this Subcommittee dated March 28, 1973.

Although we are unaware of any product diversion as a result of the use of salesman's samples, we recently revised our sampling pro

cedure. Arnar-Stone does not distribute samples of its methaqualone products except in response to written requests by physicians. Such requests must include the physician's BNDD number. The distribution of samples through salesmen have been recalled.

To the best of our knowledge all of Arnar-Stone's sales have been to legitimate sources. We are unable to determine the degree of any abuse which may have resulted from diversion from these sources, but much to our concern, some of our product apparently has become diverted into illicit channels. Whenever Arnar-Stone has become aware of any potential diversion, we have notified and cooperated with Federal, State, or local officials, as documented in the information supplied to the Subcommittee.

All incoming orders for our methaqualone products are reviewed. Any unusually large order or deviation from a customer's prior history of orders is either investigated by an Arnar-Stone representative or referred to appropriate Federal authorities. Arnar-Stone has provided many local law enforcement agencies and the FDA with a procedure for determining whether products thought to be of our manufacture are in fact counterfeit. As a result, local agencies have been able to determine in a number of instances that seized methaqualone tablets were counterfeit versions of our product.

As indicated earlier, Arnar-Stone previously recommended the placement of methaqualone in schedule III instead of schedule II. This recommendation was based upon the following considerations: (1) All products with similar therapeutic response that are currently scheduled are included in either schedule III or schedule IV. (2) Schedule II would impose the same type of restrictions on methaqualone as those imposed on raw opium, codeine, morphine, and other opiates. It is our belief that, from a purely scientific point of view, methaqualone does not have the same characteristics as those compounds. Unlike methaqualone, the drugs which currently appear on schedule II are potentially addictive at their recommended dosage level.

(3) A schedule II listing would require a new written prescription for each refill. Each prescription could only provide for medication sufficient for 1 month. It would be necessary for the patient to see his physician more frequently, thereby resulting in a possible increase in cost to the patient who purchases his prescription from a pharmacy or physician.

We believe that these are cogent reasons for placing methaqualone in schedule III. Nonetheless, as stated in our submission to this Subcommittee, we will not contest the placement of methaqualone in schedule II, as recently recommended by the Bureau of Narcotics and Dangerous Drugs.

Senator BAYH. Well, thank you, Mr. French.

You say you will not contest. Does this mean your corporation and counsel will not contest the rescheduling if it takes place administratively by the HEW and the Attorney General?

Mr. FRENCH. Yes, sir.

Senator BAYH. Thank you.

You mentioned that your methaqualone, which I understand is SoporR

Mr. FRENCH. Yes, sir.

Senator BAYH [continuing]. is being counterfeited. You mentioned that these are being picked up and you know it isn't your product.

How can you tell that? How can you differentiate between counterfeit and your product?

Mr. FRENCH. Well, in the first instance which came to our attention, in May of last year, we learned of a seizure of products reported to be of our manufacture in Dayton, Ohio. We requested samples of the seized materials and, at that time, we ran extensive tests in our own laboratories as well as tests by the manufacturer of our tableting dies to determine whether, in fact, the tablets on the street were of our manufacture and we have found through those particular studies that they were not.

Senator BAYH. Here, again, I don't want to go into great detail, but let me repeat as I said earlier-and I am sure you were here-I have said many times that if we are really going to address ourselves to the drug problem, we should look at the whole spectrum. I feel that methaqualone right now is where we need to direct our immediate attention. I have reintroduced two bills-S. 984 and S. 985 primarily aimed at barbiturates, amphetamines but which could perhaps be helpful with methaqualone in the light of your testimony. S. 984 would require each manufacturer of these drugs to place identifying marks on their tablet or capsule. In the manufacture of methaqualone, this could be done. How much of an inconvenience would it be, and what do you think of the general idea?

Mr. FRENCH. Could you clarify what type of marking you are speaking of?

Senator BAYH. It could either be a small stamped "AS" stamped on the tablets or a code signature of some kind, or a mark that would be totally unrecognizable to the person who was involved in the counterfeiting operation, but that you could easily tell whether it was yours. For example, one of the barbiturate producers, the Eli Lilly Co., stamps their name "Lilly" on all of the capsules, thus it is easy to tell when you pick up a little red tablet whether it was, in fact, manufactured by Lilly or whether it was a generic or perhaps a counterfeit.

Do you have such identifying marks?

Mr. FRENCH. Yes, sir, we do stamp our logo, which is an AS standing for Arnar-Stone Laboratories.

Senator BAYH. I see.

Mr. FRENCH. Also to add to the previous remarks I made on counterfeiting, we recently received verbal recognition from the Crime Laboratories in Dade County, Fla., which indicated to us that approximately 80 percent of all Sopor tablets, purporting to be of our manufacture that were seized were, in fact, counterfeit based upon information that we had provided to those authorities to recognize the differences between our products and others.

I do, for your possible interest, have photographs, enlarged photographs of counterfeit tablets that have been picked up. I think that the Senator could see quite clearly that although they did have an imprint of an Arnar-Stone logo on it, it is quite clear, through the appearance and the characteristics of the product, that they are clearly of a counterfeit nature, if you would be interested

Senator BAYH. I would like the staff to incorporate that information in the record as best they can and I would like to look at it my self.

[The photographs were marked Exhibit No. 21 and are as follows:]

Senator BAYH. Do you have any idea where the basic methaqualone came from that was used in this counterfeit operation?

Mr. FRENCH. I wish we did, Senator. It would make our job and your job easier.

Senator BAYH. But you would have no objection, then, to the idea of identifying marks, although apparently the counterfeiter here at least went through some effort to identify his as an Arnar-Stone product. What do you think of the corollary bill (S. 985) which would require manufacturers to incorporate an inert tracer element into the raw product, the basic material? Does Arnar-Stone sell bulk methaqualone to others?

Mr. FRENCH. No, we buy methaqualone-raw material.

Senator BAYH. You buy it? Who produces most of the raw methaqualone?

Mr. FRENCH. To my knowledge, there is one manufacturer of the raw material in this country and one in Canada, and a couple in Europe. That is, to the best of my knowledge, the case.

Senator BAYH. Without giving away any trade secrets, does Arnar-Stone buy from the same producer as Rorer?

Mr. FRENCH. I don't know. We buy our particular methaqualone product from a company in Germany by the name of Troponwerke -Dinklage and Co.

Senator BAYH. I am asking rather basic questions, so you will excuse me if I appear uneducated in this technical area, but are there differences in the structure of the various kinds of methaqualone?

Mr. FRENCH. I am really not a scientist and I don't believe I could speak to that. Our people have said on certain occasions there might be color differentiation under ultra violet light or something, but I really don't know.

Senator BAYH. What is your opinion of the inert tracer bill?

Mr. FRENCH. Would you explain that to me a little more? I am not familiar with that.

Senator BAYH. Yes. So far, we have not had any testimony indicating that there is any significant illegal bathtub operations, producing methaqualone and we have been told that the chemical formula is rather difficult. It is more difficult than amphetamines. We have had some illicit bathtub production of amphetamines but with barbiturates and methaqualone, the chemical formula is more difficult to duplicate with a home chemistry set. Whether this would be the case or not, if methaqualone is rescheduled, is something we have to ask ourselves. Whether once it is rescheduled, as it appears it will be, and becomes more difficult to obtain through quasi-legal channels as it is now the case whether this will result in bathtub methaqualone operations is something we have to consider. Thus it is important to deal with the weak link in the distribution chain and to identify the original source of diversion.

So, whether it is BETA-12, or something else, an inert substance would be incorporated in the bulk. This would help BNDD to trace the substance and, at least, they would know where it was originally manufactured.

Mr. FRENCH. If it is feasible, we would be fully in favor and would be more than happy to cooperate with whatever authorities